Saying the city's high liens are driving owners and investors away, 3rd District Councilman Martin O'Malley introduced a bill last night to severely curtail the growth of liens that often choke the rehabilitation of blighted neighborhoods.
O'Malley's proposal gained quick support on the council, with at least 13 colleagues signing as co-sponsors.
The city now charges 24 percent interest on outstanding liens slapped on properties offered at tax sale. Under O'Malley's proposal, that rate would drop to 6 percent.
"We need to figure out why we're charging the highest interest rate in the state," O'Malley told his colleagues, "when we have the highest number of properties going into these tax sales."
His proposal is the latest in a spate of reforms aimed at the city's vacant housing crisis. The moves follow a Sun series that detailed the city's haphazard approach to an estimated 40,000 vacant and decaying city properties -- and the impact of huge liens piled on many of them.
Already, the city is moving to create a "lien release" policy that would make it easier for purchasers to buy properties without having to pay off another's liens -- while debt collectors pursue the previous owner.
And Mayor Kurt L. Schmoke said last week that he wouldn't authorize demolitions of vacant houses, except in emergencies, unless the city had plans for the lot left behind after the house comes down.
O'Malley's bill was referred to the Taxation and Finance Committee that he heads. He scheduled a hearing for May 29.
The city places liens on properties for a variety of reasons, including repair, boarding or demolition work. Often, the liens quickly outstrip the value of the property, hastening the abandonment by cash-strapped owners.
Initially, the interest rate on the liens is 1.5 percent a month -- nearly 20 percent a year. If liens are not paid off quickly, then the property goes on the tax sale auction block. At that point, the interest rate is 24 percent a year.
"Twenty-four percent is buying us war zones," 5th District Councilwoman Rochelle "Rikki" Spector told the council, noting that the high interest rates fuel abandonment and decay of neighborhoods. "It is not buying us people to live in Baltimore."
O'Malley said the 24 percent rate was adopted by the council in the 1970s -- when inflation was running well into double digits -- to persuade owners to pay off their bills quickly.
"It had the opposite effect," he said, namely of fueling abandonment.
Added City Council President Lawrence A. Bell III: "There might have been a rationale several years ago for the present policy. But maybe in light of the present market, it's time to change it."
The policy, he noted, predates Schmoke's administration.
Basically, O'Malley's bill would make it less costly to redeem a property.
"The interest rate we charge for people to redeem these properties is so usurious and so high and compounded on a monthly basis that the value of the liens quickly outstrips the value of the property," O'Malley said.
The city offers thousands of abandoned properties at tax sale auction each year, requiring a minimum bid that equals the liens draped over the property. In some cases, after a bidder makes a successful offer, the owner redeems the property by paying off the liens along with the bidder's expenses -- and an interest charge of 2 percent a month.
The city's annual tax sale is scheduled for late May -- a three-day event at the Baltimore Convention Center. Last month, the city scheduled 22,493 properties for sale -- one of every 10 privately owned properties in Baltimore. While most of those will probably be redeemed by their owners before the auction, thousands are expected to go on the block.
Pub Date: 4/15/97